GOP plan could end Michigan Medicaid expansion by 2019

Michigan’s Medicaid expansion that insures more than 650,000 low-income residents would end in two-and-a-half years if Congress approves the U.S. House Republican replacement plan for the Affordable Care Act, according to a new Senate Fiscal Agency report.

A requirement negotiated into legislation that created the Healthy Michigan Plan in 2013 requires the insurance program in its current form be ended if the state’s investment or spending exceeds the savings it generates.

Proposed cuts to federal Medicaid spending included in the U.S. House GOP plan would trigger the termination of the expansion program by fiscal year 2020, which begins Oct. 1, 2019, the Senate Fiscal Agency concluded. It would cost the state $530 million to maintain Healthy Michigan at that point, an amount that would trigger its end under state law, Senate analysts said.

The prospect alarms many Medicaid expansion supporters. Gov. Rick Snyder has argued that Healthy Michigan is a success and lobbied late last month in Washington to keep his version of Medicaid expansion, battling other GOP governors who rejected to expand the program under the 2010 health care law. He told The News early this year the state can’t afford to finance Medicaid expansion after a significant federal aid reduction.

“We could have 650,000 people who no longer have health care,” said Emily Schwarzkopf, health policy analyst for the Michigan League for Public Policy, which supports the Healthy Michigan plan. “It’s been a job creator, given health care to a lot of new people that didn’t have health care before and saved money in hospitals by reducing uncompensated care.”

Michigan Senate Majority Leader Arlan Meekof, R-West Olive, said he supports congressional efforts to reform Medicaid, but doesn’t like how the current plan would affect Michigan.

“(In) a sense, that helps the national government save money. I guess that’s a good thing,” Meekof said Thursday. “But balancing their budget on our budget isn’t really a good idea either.

“If they don’t send the money, the bill that we passed says the Medicaid expansion ends. So it’d be 650,000 people who would no longer have health care coverage.”

But State Sen. Mike Shirkey, the ClarkLake Republican who played a key role in developing the Medicaid expansion legislation in the House, called the new federal health care proposal an “opportunity” to revisit the popular Healthy Michigan program.

It would give the state flexibility to create a “more conservative” version, said Shirkey, who pushed for healthy living requirements and the cost-savings termination trigger in the state law.

“I’m excited about going from a Healthy Michigan generation one to a Healthy Michigan generation two and fixing some things we probably should have done differently,” he said. “I’m in no way fearful of the change opportunity that’s coming up.”

End is coming

Under President Barack Obama’s health care law, the federal government paid 100 percent of the bill for expanded Medicaid for three years. Starting this year, states are required to contribute payments that will be ratcheted up through 2020 when states’ contributions will be capped at 10 percent.

Those contributions will push Healthy Michigan past the termination threshold, according to the Senate Fiscal Agency’s report.

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Even if congressional Republicans don’t replace the Affordable Care Act, Healthy Michigan is headed for an end because the state’s contribution into the program starting this year will result in costing Michigan more than it is saving, Senate analysts said in the report.

Snyder was among a small number of Republican governors who broke party lines to support expanded Medicaid, which provides health coverage for people with incomes at or below 138 percent of the federal poverty line, about $16,000 per year. He passed the expansion with overwhelming support from Democratic legislators, but had difficulty cobbling together backing from a majority of conservative Republican lawmakers.

The program has attracted about 180,000 more recipients than originally projected. Before Healthy Michigan launched on April 1, 2014, it was predicted that 320,000 people would sign up the first year and 470,000 in total by 2021.

The U.S. House proposal would reduce Medicaid funding paid to the states about 25 percent, according to an analysis released Monday by the non-partisan Congressional Budget Office. It would amount to an about $3.25 billion reduction in Michigan, potentially triggering Healthy Michigan’s demise.

Nationally, the CBO projects that 14 million fewer people would be eligible for the Medicaid program by 2026 if the American Health Care Act becomes law.

Michigan’s Medicaid spending topped $17.6 billion in Fiscal Year 2016, with roughly $13 billion paid by the federal government and $5 billion by the state. States would pay a larger share under the GOP plan in return for more control over their Medicaid programs.

GOP plan advances

The Michigan analysis comes as the U.S. House Budget Committee approved Thursday the plan crafted by House Speaker Paul Ryan, R-Wis.

Currently, the federal government matches whatever states decide to contribute to their Medicaid programs, with no limit on enrollment. The GOP plan would switch to a per-capita funding system based on the number of people enrolled in 2020. Funding would increase along with increases in the Consumer Price Index.

The GOP plan also would end special enhanced Medicaid funding received by Michigan and 30 other states that adopted the expansion—a change that would cost Michigan $134.6 million in Fiscal Year 2019-20, according to the Senate Fiscal Agency report.

Republicans face opposition from Democrats and have splits in their party among some moderates who see the plan as cutting too much and Freedom Caucus conservatives who want Medicaid aid sent as block grants to the states earlier than 2020.

Under the Affordable Care Act, the federal government promised to pay no less than 90 percent of health care costs for expanded Medicaid enrollees, compared with 65.15 percent paid for people enrolled in traditional Medicaid. The traditional program is reserved for people who are disabled, pregnant or caring for small children or a disabled person.

In the GOP plan, states would received the same lower rate for all people enrolled in the program starting in 2020.

“This ... cost increase, barring any legislative action to change the Medicaid expansion (”Healthy Michigan”) statute, would result in termination of Medicaid expansion in Michigan after FY 2019-20,” the Senate agency said in its report, adding it would cost the state $532.6 million that year to continue the program.

The proposal is opposed by health industry groups including the American Medical Association, AARP, some insurance industry groups and others, who argue that millions of Americans would lose health coverage and cost the country money in the long run.

“If this bill prevails, there will definitely fewer people covered, protections will be weaker, and most people, especially low-income folks will incur higher costs,” said Dizzy Warren, executive director of the advocacy group Enroll Michigan.

Supporters of the Ryan plan argue the current Medicaid model is unsustainable and states will find innovative ways to manage their programs if given the authority.

Shirkey said the Healthy Michigan plan has succeeded in bringing back Affordable Care Act taxpayer dollars to the state for use in a productive way. But the House GOP legislation “allows us to design the program to fit whatever funding’s available,” including federal match dollars and any additional resources the state could decide to throw in, he said.

“You and I cannot buy on the market a Medicaid-equivalent health plan, because it’s too rich. It is a marvelously rich program, and so it needs some rationalization to occur to shrink it back to what most of us get in the private sector.”